On 20/07/11 9:08 PM, Eugen Leitl wrote:
On Wed, Jul 20, 2011 at 11:56:06AM +0200, Alfonso De Gregorio wrote:
I'd better rephrase it in: expectation to have "money backed by bitcoins" exhibiting all the desirable properties of a perfect currency (ie, stable money) are greatly exaggerated.
The question is not whether it's perfect, but whether it's good enough.
The question is whether it is even close. It's pretty clear it can never be stable enough to be a currency. Pretty much all currencies lean on some form of stability; BitCoin does not, and suggests "when it's big enough, supply v. demand will stabilise it..." Only gold/silver has ever pulled off that trick, and emulating gold is not what you'd call a winning strategy. Actually there's a name for it: alchemy. BitCoin is cryptographic alchemy.
BTC is basically a global version of http://en.wikipedia.org/wiki/Local_currency or http://en.wikipedia.org/wiki/Alternative_currency and hence isn't something completely new.
Sure, and those things have rules too. Local currency is local; BitCoin is not. The difference is that in local currencies we can rely on the trust and reputation networks to stop people stealing. In BitCoin, we can't. In local currencies, when the currency moves outside the very tight trust circle where everyone knows each other, they fail, because someone moves into the currency who has no reputation to lose. (Alternative currency is just a term used by the regulated currency people, it doesn't really tell us anything.)
It would be intesting to see whether BTC's successors could improve the scheme, by allowing a (subexponential) growth, built-in devaluation to encourage circulation and discourage hoarding (this would be probably hard to do), and so on.
Not really. It's problem isn't its mathematics or its release rate, but that it has no ground to stand on. Which is to say, if people want to bid it to the sky, they can. If people want to dump it to the bottom of the ocean, they can too... With a currency that is backed on something stable, the stable commodity forms an anchor around which value gyrates. So, it is worth holding if the price goes up too low, because you can always use it for its stable thing. E.g., in US of A, the american people are quite happy to hold $$$ because they can pay their taxes with it. They really don't care that much what the exchange rate is doing, up or down. This anchor means USD is a good currency. Possibly what people don't realise is that it is very easy to corner a market. However, the fundamental value of the unit (the commodity) will stabilise and punish the speculator who corners the market. With BitCoin there is no underlying anchor to punish the person cornering the market, so the games will be excessive, and volatility will be too high to be "current." iang PS: having said all that negative stuff, I quite like BitCoin. If it got the econ right, we'd be having different conversations :) _______________________________________________ cryptography mailing list cryptography@randombit.net http://lists.randombit.net/mailman/listinfo/cryptography ----- End forwarded message ----- -- Eugen* Leitl <a href="http://leitl.org">leitl</a> http://leitl.org ______________________________________________________________ ICBM: 48.07100, 11.36820 http://www.ativel.com http://postbiota.org 8B29F6BE: 099D 78BA 2FD3 B014 B08A 7779 75B0 2443 8B29 F6BE